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Tuesday, October 28, 2003 - Page updated at 12:00 AM

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Boeing, Air Force used many tactics to promote deal

The Washington Post

WASHINGTON — The idea of converting 767s into tankers surfaced formally in February 2001, when Boeing proposed to convert 36 planes and sell them to the Air Force for $124.5 million each. The bid was undercut by an Air Force study — drafted by a consulting arm of Boeing — concluding that existing Air Force KC-135 tankers would be "viable through the year 2040."

After the Sept. 11, 2001, terrorist attacks, airlines deferred orders for 767s and Boeing laid off thousands of employees. But the Air Force had not even listed tankers among its "unfunded priorities" in 2001, a multibillion-dollar wish list of weapons it wanted but could not afford.

So on Sept. 25, 2001, the company's top executives met with Darleen Druyun, then a senior Air Force acquisitions officer, at the Pentagon to work out a lease deal instead.

Druyun agreed, according to notes taken by Boeing, to promote the leasing idea on Capitol Hill and find needed money by cutting back a modernization program for existing KC-135 tankers.

Druyan also said "work placement could help," meaning Boeing should ensure that subcontracts were awarded in the districts of key Congress members, according to the notes. She noted further that Senate Appropriations Committee Chairman Ted Stevens, R-Alaska, could "work" a former employee of his who was then at the Office of Management and Budget. The effort by the company and top Air Force officials to promote the deal is detailed in Boeing e-mails obtained and released to the news media by Sen. John McCain, R-Arizona, a staunch opponent of the lease deal.

Rudy DeLeon, a former Air Force undersecretary and deputy defense secretary who became the head of Boeing's Washington office in July 2001, said in an interview that the e-mails show "people who believed in the program" were working hard to get it completed. A company official defended the lobbying effort as common practice and said the only atypical thing about it is having it on public display in the e-mails. Druyun declined to comment.

In November 2001, the Air Force drafted a document spelling out what capabilities the new tankers must have. Col. Mark Donohue, an official in the air mobility office, promptly sent it to Boeing for private comment, and the company sought and received concessions so that the requirements matched what the 767 could do.

The Air Force agreed to drop a demand that the new tankers match or exceed the capabilities of the old ones.

Other concessions were in price negotiations, according to e-mails. Druyun "spent most of the time bringing the USAF price up to our number. ... It was a good day!" a Boeing executive wrote in June 2002.

Still, the deal faced large hurdles. It called for Boeing to sell the planes to a nonprofit trust, which would lease them to the Air Force. Trusts of this sort got a bad reputation after corporations such as Enron used them to hide accounting.

Among critics of the deal, Sen. Peter Fitzgerald, R-Ill., said the Air Force seemed to be using the trust to obscure the deal's cost.

Bob Gordon, a Boeing vice president, worried in an August 2002 e-mail that the company could have a "PR risk" because the idea that leasing was preferable to buying "won't make sense in the newspapers."

To overcome opposition to the deal, Air Force officials sought to use Boeing's political connections to discredit critics, e-mails say.

One quotes Bill Bodie, a senior adviser to Roche, as urging Boeing executives to "have our friends on the Hill, think tanks, etc. get more visible/vocal" in registering their support for the program. Bodie declined to comment.

The company sought to solidify support from Rep. John Murtha of Pennsylvania, the senior Democrat on the defense-appropriations subcommittee, by agreeing to explore a subcontract to a firm in his district, some of the e-mails state.

Boeing also asked retired Adm. Archie Clemins to submit an article touting the tankers to Navy Times, part of the Gannett chain. Clemins acknowledged in an interview that Boeing "helped me write that." In an internal e-mail, a company official called it "ghost-written." The article appeared in five publications.

Months later, Boeing hired Clemins as a consultant. A Boeing spokesman said he "was aware of no relation between the hiring and the op-ed."

One Boeing e-mail noted that "we are in touch with Andy Card (White House Chief of Staff Andrew Card Jr.) and White House political operation." It said a "union strategy (was) in play," which McCain has interpreted as a go-ahead to Arizona labor unions, which ran advertisements calling on him to register as a lobbyist for Airbus, a Boeing competitor.

Late last year, a Boeing e-mail said, Card called Roche and others to the White House and asked them to detail how many jobs the leasing deal would create; this was a key issue for an administration during which 2.5 million jobs have been lost.

Boeing executives wrote in an e-mail to Druyun the next day that the lease would support 25,000 to 30,000 jobs, including both existing and new workers.

The next day, Roche sent a letter to Card that overstated this tally. Citing Boeing as his source, he said the deal would create about 39,000 new jobs alone — more than 11,000 at Boeing and 28,000 among suppliers, according to the letter.

Asked to explain the discrepancy, Air Force spokeswoman Cheryl Law said Roche felt his numbers were "consistent" with Boeing's.

Under continuing pressure from the White House budget office, Boeing agreed to cut the price of the tankers; it accomplished the reduction by further scaling back the tanker capabilities. The company was motivated in part, according to its e-mails, by the looming retirement of Undersecretary of Defense Edward Aldridge Jr., a supporter of the deal. On May 23, Aldridge's last day at the Pentagon, he announced an agreement with Boeing on most terms of the lease.

Copyright © 2003 The Seattle Times Company

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